Hungary should cut FX state debt stock to zero, central banker says

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BUDAPEST, Oct 12 (Reuters) - Hungary should cut the share of debt denominated in foreign currencies that it holds to zero, which would take an overhauled debt-financing strategy, central bank Governor Gyorgy Matolcsy said on Friday, according to the state news agency, MTI.

The central bank is not in charge of debt-financing policy, but Matolcsy, Prime Minister Viktor Orban’s former economy minister, has implemented a string of programmes over the past years to cut Hungary’s exposure to foreign-currency debt.

The measures have included a conversion of Hungarian mortgage loans into forints just before the Swiss National Bank abandoned its cap on the franc in 2015 and cheap refinancing loans for small businesses to convert their loans.

Reducing the state foreign-currency debt should be Hungary’s top economic policy priority, MTI quoted Matolcsy as saying at a business forum, in a summary of his remarks.

Hungary issued 1 billion euros worth of eurobonds last month as debt agency AKK tried to build up financing buffers through the end of the year, while the government is locked in a dispute with the European Commission over European Union funds.

At the end of August, the debt denominated in foreign currency as a proportion of total debt stood at 19.5 percent. The AKK and the finance ministry could not immediately comment on Matolcsy’s remarks.

Top central bankers have recently argued in favour of channelling more household savings from short-term instruments like bank deposits into government debt and stocks to bolster the capital market and cut reliance on external funding. (Reporting by Gergely Szakacs, editing by Larry King)